UPDATE
Agreement was reached at the
rescheduled June 12–17 Ministerial Conference
Consensus was achieved by leaving out disciplines on subsidies contributing to overcapacity and overfishing (Article 5). Members agree to complete negotiations on these in four years or else the new agreement will lapse (Article 12).
The final text is here (also in pdf).
It only gained consensus backing by removing a missing piece.
It says the new agreement will be inserted into Annex 1A (goods) after the Subsidies and Countervailing Measures Agreement. An official document certifying that the text is correct was circulated on July 13, 2022.
More updates are listed here
The points raised in the article below still hold even though it was first written before the original 2021 dates for the Ministerial Conference.
By Peter Ungphakorn
POSTED NOVEMBER 17, 2021 | UPDATED AUGUST 18, 2022
It was always touch-and-go whether World Trade Organization (WTO) members could strike a deal on curbing harmful fisheries subsidies when their ministers were due to meet first in November 2021, and then rescheduled in June 2022.
The agreement that they did eventually reach is incomplete. Consensus was achieved by leaving out disciplines on subsidies contributing to overcapacity and overfishing. Members agreed to complete negotiations on these within in four years of the new agreement taking effect, or else it will lapse.
But even with the deal that was struck, there are more procedures to go through before it becomes WTO law and before it applies to WTO members.
That’s right. Even though agreement was reached on June 17, 2022, for now (July 2022) it is still not effective. It is not part of WTO law.
This article is about what is needed to turn the agreement into legal rules. How long that will take is up in the air, but it could be a year or two at least. It might even take longer.
That said, there’s nothing to stop members implementing unilaterally what they agree. On an issue like this they should do so anyway. But they would not be able to use, for example, WTO dispute settlement against other countries because there would be no legal rules yet.
The procedures are worth bearing in mind. They are not well-known, even among people who follow trade.
This was demonstrated when I ran a little poll on Twitter on this subject. Out of 150 people who responded, 86% were wrong.
The poll was about the only other comparable precedent, the Trade Facilitation Agreement.
That deal was struck in 2014. Seven years later, the question was: In how many of the WTO’s 164 members does the agreement apply?
The largest number (43%) assumed, understandably, it applied to all 164 members.
The Trade Facilitation Agreement still does not apply to the countries that have not ratified it
The truth is it only applies to the 154 WTO members that have ratified it. The WTO has 164 members, so the agreement does not apply to 10 members — or rather, nine members plus one anomaly.
The nine that still have not ratified the agreement are: Democratic Republic of Congo, Guinea-Bissau, Haiti, Mauritania, Solomon Islands, Surname, Tonga, Venezuela and Yemen.
The anomaly is the EU whose ratifications count as 27 when the EU is 28 WTO members (see text).
So what are the next steps for an agreement like the ones on trade facilitation and fisheries subsidies?
Continue reading or jump to
The importance of ratification | Not plurilateral not fully multilateral | And fisheries subsidies?
The importance of ratification
HOW TO RATIFY THE AMENDMENT
The WTO website now has a handy guide for members on “How to accept the Protocol of Amendment to insert the Agreement on Fisheries Subsidies into Annex 1A of the WTO Agreement”
The 18-page fisheries subsidies draft submitted to the Ministerial Conference, along with its accompanying explanation, confirms that this was proposed as a new WTO agreement. The final text (see the update box above) sticks to that. Previously it had been called, vaguely, an “instrument”.
For a new agreement to be placed in the WTO’s rule-book, it has to be ratified by the WTO’s members individually. (The official term is “accepted”.)
This is designed to preserve countries’ sovereignty, to ensure that new legal rights and obligations are not imposed from Geneva (or wherever the decision is made) but are endorsed in each member.
They don’t have to ratify it, just as 10 still have not ratified the Trade Facilitation Agreement. But not ratifying has consequences.
The legal procedure for inserting the new agreement into the rule book is an amendment adding it either to the umbrella “WTO Agreement” or one of its annexes.
There are four annexes.
Annex 1 covers three areas of trade. It is split into
- Annex 1A (goods)
- Annex 1B (services)
- Annex 1C (intellectual property)
Annex 2 contains the rules on legal disputes.
Annex 3 handles reviews of members’ trade policies.
Annex 4 is for “plurilateral” agreements — those involving only part of the membership, such as on government procurement and civil aircraft.
The Trade Facilitation Agreement affects trade in goods, so it has been added to Annex 1A.
That means the package of WTO agreements has been amended to include the new Trade Facilitation Agreement.
(That is also the plan for the Fisheries Subsidies Agreement. The text even says where it should go: “to be placed after the Agreement on Subsidies and Countervailing Measures” in Annex 1A.)
Amendments are governed by Article 10 of the umbrella WTO agreement, in this case paragraph 3:
“Amendments […] of a nature that would alter the rights and obligations of the Members, shall take effect for the Members that have accepted them upon acceptance by two thirds of the Members and thereafter for each other Member upon acceptance by it. …
There are two steps involved here.
STEP 1: The new agreement is only added to the rule-book after two thirds of WTO members (110 out of the present 164) have ratified it.
The Trade Facilitation Agreement took two years and three months to get to the two-thirds ratification threshold, from November 27, 2014 to February 22, 2017.
So far so straightforward.
STEP 2: What is not widely understood is that even after the two-thirds mark is reached, the new agreement only applies to members that have ratified it, not to all WTO members.
Using the legal terms, the new agreement only “takes effect for” the members that have “accepted” it:
“… shall take effect for the Members that have accepted them upon acceptance by two thirds of the Members and thereafter for each other Member upon acceptance by it. …”
So the Trade Facilitation Agreement still does not apply to the 10 that have not ratified it: Democratic Republic of Congo, the EU*, Guinea-Bissau, Haiti, Mauritania, Solomon Islands**, Surname, Tonga, Venezuela and Yemen.
* “The EU” is a peculiar case: its member states are listed, so essentially it is covered, but for bizarre legal reasons the official count of WTO members ratifying is still 154
** Solomon Islands has committed implementation dates for some provisions in 2022 and 2023 — see page 13 of this — even though it has not ratified the agreement
Not plurilateral but not fully multilateral
This is awkward.
This is awkward. It is not plurilateral. And yet it does not apply to the whole membership
Trade Facilitation is a multilateral agreement. It sits in annex 1A, “Multilateral Agreements on Trade in Goods”. It is not plurilateral. And yet it does not apply to the whole membership.
The situation with one other amendment is even worse. WTO members agreed to amend the intellectual property (“TRIPS”) agreement in 2005. The change allows generic pharmaceutical products to be exported under compulsory licence to poorer countries unable to make them themselves.
It took just over 11 years for the two thirds threshold to be reached. Even now (August 2022), 30 members (or 31, depending on how the EU is counted) still have not ratified it.
The WTO website lists two versions of the agreement (in Annex 1C). One is for members that have not ratified it (the original version). The other is for those that have (the amended version).
This is not as bad as it sounds because the amendment simply turns an identical “waiver” from 2003 — which always applied to all members — into a proper legal text within the rule book.
So failure to ratify has no practical effect on the countries concerned, which also means that ratifying should not be a big deal for them either. It just looks legally messy — and less transparent since waivers are not included in the rule book, they are just decisions floating around.
The end of 2023 is the present deadline for the remaining countries to ratify the intellectual property amendment. But the deadline has been extended before and no doubt it will gain.
And fisheries subsidies?
With the fisheries subsidies agreement, will countries behave? Or will these experiences be repeated? (And is it time for WTO members to rethink how ratifications work?)
We don’t know, even in these early days after the agreement has been opened for ratification. We have to hope for the best.
The worse case is if a major player drags its feet over ratification, or several of them do. This could delay reaching the two-thirds ratification threshold. And even after the threshold is reached, the new rules would not apply to the foot-dragging country (or countries) despite the original consensus agreement. That would be really messy.
Is it likely? Who knows? It all depends on the internal politics of the country or countries concerned.
And now the fun starts.
The other WTO members would have the power to take this further. The rules on amendments (Article 10.3) add this:
… The Ministerial Conference may decide by a three-fourths majority of the Members that any amendment made effective under this paragraph is of such a nature that any Member which has not accepted it within a period specified by the Ministerial Conference in each case shall be free to withdraw from the WTO or to remain a Member with the consent of the Ministerial Conference.
That is an extraordinary piece of legal drafting. It says:
First, WTO members can decide by a three-quarters majority to take this further.
Second, what happens next — if this is taken further — could be expulsion from the WTO, which would throw the WTO into turmoil.
Does the text really mean the offending member can be expelled? It apparently offers that country a choice: it can withdraw from the WTO, or stay in but only with agreement from WTO members (presumably by consensus).
But is that what the strange sentence in Article 10.3 really means? It’s difficult to think of an alternative interpretation.
“You are free to leave.”
“I don’t want to.”
“We said you are free to leave”
“I said I don’t want to.”
“‘Free to leave’ means ‘Go!’”
“Please, can I stay?”
“We’ll think about it.”
I look forward to an explanation of what the Vienna Convention on the Law of Treaties says about “free to withdraw” without “free to remain”.
More on WTO amendments, fisheries subsidies (updates and tagged articles), trade facilitation
Adapted from a Twitter thread
Updates:
August 18, 2022 — adding the sidebar box on how to accept the amendment
June 17, July 15, 2022 — adding the update box and links to the final text and its certification, and editing the text to reflect agreement having been reached
November 25, 2021 — adding a paragraph with links on the draft for the Ministerial Conference
November 18, 2021 — some edits for clarity, some hyperlinks added
Image credits:
Fishing boats | Zoltan Tasi, Unsplash licence
Chart | the author, available under CC BY 2.0
Map | WTO
Cartoon | André Santana, Pixabay licence
Trade β Blog 